Test Environment Versions?

Test Environment Versions?

We've run SDP for years but now find that setting up a dev environment would be a good idea.  I've reviewed the instructions here 
but I need a little more guidance as I was not part of the initial setup of our Helpdesk, and some things are not clear.  The 

1) The production system has SDP installed on the E: drive, but is installing it in C: on the dev system OK?  Do the paths need to be 100% identical?
2) We have 2 SDP instances (IT and a HR one), with about 28 technicians in the IT instance and 5 in the HR.  Do we need to get an extra license for the dev version or will they be covered when I copy the backup over?
3)  We have the Standard edition in production, according to the About info. Is that what I should choose between Standard, Professional, or Enterprise? (I'm guessing Standard)
4) So I choose the Free Version or Trial?  (I'm guessing Free)
5) The production database is stored on a separate server.  Should I expect the dev edition to create a new database there, or on the dev server?  Am I given any control or choices in that process?

When I'm done installing it, I think I will have a Free Standard Edition and then I'll restore the backup from Production on it.  I'm just not sure what happens during the restoration that gets our database in place.